A rare (and temporary) pari passu victory for Argentina

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This is the best news that Argentina could possibly have hoped for: the Second Circuit Court of Appeals — the same three judges which upheld Judge Griesa’s decision last time around — has decided that this time, he’s gone too far. Here’s their order:

If you recall, the big thing that Griesa did last week was to not put a stay on his order, forcing a showdown on December 15, when Argentina is due to make a $3 billion payment to its exchange bondholders. If Argentina made that payment, said Griesa, it would also have to pay its holdouts in full.

The Second Circuit, here, has said that Griesa was too hasty: it wants time to think a bit over what he’s done, and whether it’s just. So everything is “stayed pending further order” of the Second Circuit, and nothing is going to be decided for a while — at least until after February 27, when oral arguments will be heard. (Expect a packed-to-the rafters courtroom for that one.)

As a result, Argentina has three months’ breathing room — and every interested party in this case, which includes the US government and lots of people representing the hidden plumbing of the markets, will file an amicus brief.

What’s more, the Second Circuit also recognized the exchange bondholders as “interested non-parties” in the case, who can themselves appeal Griesa’s judgment — thereby setting up a Boies vs Olson showdown in February, with Argentina very much on the same side as David Boies, who’s representing the exchange bondholders, and against Ted Olson, who’s representing Elliott Associates.

At this point, handicapping the ultimate outcome is anybody’s guess, although whatever the Second Circuit decides you can be pretty sure that one side or the other will appeal it to the whole circuit, sitting en banc. As a result, don’t expect those Argentine credit default swaps to trigger any time soon: this case is going to be caught up in the law courts well into 2013.

My hope is that somewhere up the chain, principles of national sovereignty and smoothly-functioning markets will prevail, and Griesa will be overruled. But I have no idea where or when that might happen, or how likely it is. All I know for sure is that a lot of lawyers are going to be making an absolutely enormous amount of money in the next few months.